Oracle’s $300 billion megadeal with OpenAI is testing the limits of Wall Street’s appetite for debt tied to America’s data-center boom.
Banks including JPMorgan Chase struggled for months to spread the risk of billions of dollars in loans they made to build data centers leased to Oracle in Texas and Wisconsin, people familiar with the matter said. Many financial institutions that would ordinarily buy those loans face restrictions on how much exposure they can have to a single counterparty, and
Oracle’s $300 billion megadeal with OpenAI is testing the limits of Wall Street’s appetite for debt tied to America’s data-center boom.
Banks including JPMorgan Chase struggled for months to spread the risk of billions of dollars in loans they made to build data centers leased to Oracle in Texas and Wisconsin, people familiar with the matter said. Many financial institutions that would ordinarily buy those loans face restrictions on how much exposure they can have to a single counterparty, and the sheer size of these debt packages pushed them to the limit with Oracle. As a result, bank balance sheets got clogged, constraining the financing prospects of future projects tied to Oracle and OpenAI.
For example, lenders balked at financing the expansion of a data-center complex in Abilene, Texas, if Oracle were the tenant, according to people familiar with the matter. That led the developer, Crusoe, to lease it to Microsoft instead.
The challenges surrounding Oracle highlight a risk for the multitrillion-dollar data center boom, where limited access to capital compounds obstacles caused by a strained electric grid and a growing public backlash.
Any slowdown in data center construction and completion would stymie a build-out that AI players desperately need. Some top AI companies appear to be hitting the limit of what they can offer users as demand for computing firepower, which is provided by data centers, exceeds supply.
Lenders grew more comfortable with Oracle-related projects after the company said it would raise all the money it needed for 2026 by issuing roughly $50 billion in stock and bonds. Oracle said in a post on X last week that each data center it is developing for OpenAI is moving forward on time.
But even after it raises that amount, Oracle still has additional cash funding needs of $100 billion or more for 2027 and the first half of 2028, according to Morgan Stanley credit analysts. “We’ve pondered how [Oracle’s] considerable funding needs over the next three years may test the depths of different fixed-income markets,” the analysts wrote in February.
“We are proud of the rapid progress that’s been made both in financing and developing our data centers,” an Oracle spokesperson said in an email. “Our partners have diversified their capital sources in ways that enable us to keep construction moving forward on time and as planned.”
It isn’t just Oracle, a 49-year-old database and software company, that has a lot riding on its transformation into an AI computing provider. OpenAI is counting on Oracle to deliver the capacity it needs to scale ChatGPT’s growth ahead of a hoped-for public listing.
Silicon Valley needs access to debt to meet its goals for AI-related spending. Big tech companies are expected to generate enough cash to cover only about half of the $3 trillion they are projected to spend on AI through 2028, according to analysts at Morgan Stanley. The rest has to come from banks, corporate bonds, private credit and other forms of financing.
So far, Wall Street is largely giving a blank check for the AI ambitions of the most creditworthy tech companies, such as Google, Microsoft and Meta.
Oracle, though, is in a comparatively weaker financial position than big-tech rivals. It has a lower investment-grade credit rating, more debt and is burning cash. Much of its future revenue is tied to a money-losing startup that is facing growing competitive pressure. The cost of protecting Oracle’s bonds against a potential default via credit-default swaps roughly quadrupled between late September and late March, though it has fallen slightly since then.
That has made lenders nervous about putting too much money into projects tied to the company, whose shares have declined by over 30% in the past six months.
Much of the borrowing tied to the OpenAI megacontract was done by projects involving data center developers working with Oracle. The debt was structured as short-term construction loans meant to be syndicated among a group of banks and other institutions. Oracle is the tenant and OpenAI is the subtenant on the deals, but the debt doesn’t sit on Oracle’s balance sheet.
These loans were among the largest-ever deals in project finance, bankers say. About $10 billion in loans were taken out for Crusoe to develop the original OpenAI site in Abilene. Vantage Data Centers is constructing a campus in Shackelford County, Texas, and another in Port Washington, Wis., with $38 billion in borrowed money. A Stack Infrastructure project for a fourth OpenAI facility in Dona Ana County, N.M., raised about $18 billion.
To manage risk, banks and institutional investors typically have rules capping their exposure to a single counterparty or tenant. Those concentration limits emerged as an obstacle when a group of banks were syndicating some of the loans in late 2025 and early 2026, the people said.
It still took months. Vantage said the loans for its Texas and Wisconsin projects with Oracle were largely syndicated in the fourth quarter of last year and are expected to close in the second quarter of this year. “The underwriting and distribution garnered more than 50 lenders with all underwriters achieving successful syndication levels,” a Vantage spokesperson said in an email.
Some large banks that funded other deals sat out a Michigan data-center campus being built for Oracle. Related Digital, the developer building the site, chose Bank of America to take the lead on arranging financing, people familiar with the matter said, in part because it didn’t have as much Oracle exposure.
Related decided to issue bonds for the deal after seeing the indigestion in the construction-loan market. Money manager Pimco is set to buy a big chunk of the deal.
Write to Peter Rudegeair at peter.rudegeair@wsj.com and Berber Jin at berber.jin@wsj.com
One Subscription.
Get 360° coverage—from daily headlines
to 100 year archives.
Archives
HT App & Website